Press Release

GOLETA, Calif.--(BUSINESS WIRE)--
Inogen,
Inc. (NASDAQ: INGN),
a medical technology company offering innovative respiratory products
for use in the homecare setting, today reported financial results for
the three-month period ended June 30, 2018.

Second Quarter 2018 Highlights

Record total revenue of $97.2 million, up 51.6% over the same period
in 2017

Record sales revenue of $92.0 million, up 58.5% over the same
period in 2017

Rental revenue of $5.3 million, down 13.7% from the same period in
2017

Increase in planned hiring in Cleveland by year-end 2020 to 500
employees, approximately two-thirds of which are expected to be sales
representatives, up from the original target of 240 employees

GAAP net income of $14.6 million, reflecting a 75.2% increase over the
same period in 2017 and a 15.0% return on revenue

Adjusted EBITDA of $19.0 million, representing 32.2% growth over the
same period in 2017 and a 19.5% return on revenue (see accompanying
table for reconciliation of GAAP and non-GAAP measures)

Total units sold were 54,700, an increase of 22,300, or 68.8%, over
the same period in 2017

“The second quarter of 2018 was a notably strong quarter for us as we
generated record revenue across all three sales channels, while also
reporting record operating income,” said Chief Executive Officer, Scott
Wilkinson. “We are continuing to execute on our strategy to hire
additional sales representatives and invest in advertising activities to
increase consumer awareness as we believe this is still our most
effective means to drive high revenue growth and portable oxygen
concentrator adoption.”

Second Quarter 2018 Financial Results

Total revenue for the three months ended June 30, 2018 rose 51.6% to
$97.2 million from $64.1 million in the same period in 2017.
Direct-to-consumer sales rose 74.3% over the same period in 2017, ahead
of expectations, primarily due to increased sales representative
headcount and additional consumer advertising. Domestic
business-to-business sales also exceeded expectations and grew 55.7%
over the same period in 2017, primarily driven by continued strong
demand from the Company’s private label partner and traditional home
medical equipment providers. International business-to-business sales in
the second quarter of 2018 increased 39.1% over the comparative period
in 2017, primarily due to continued adoption from our European partners
and favorable currency rates. Sales in Europe represented 88.3% of
international sales in the second quarter of 2018, up slightly from
87.6% in the second quarter of 2017. Rental revenue in the second
quarter of 2018 was $5.3 million compared to $6.1 million in the second
quarter of 2017, representing a decline of 13.7% from the same period in
the prior year. The decrease in rental revenue was primarily due to a
decline in net rental patients on service of 11.8% compared to the
second quarter of 2017. Rental revenue accounted for 5.4% of total
revenue in the second quarter of 2018, down from 9.5% of total revenue
in the second quarter of 2017.

Total gross margin was 49.8% in the second quarter of 2018 versus 49.2%
in the comparative period in 2017. The increase in total gross margin
was primarily due to a continued shift towards sales revenue versus
rental revenue. Sales gross margin was 51.1% in the second quarter of
2018 versus 51.8% in the second quarter of 2017. The sales gross
margin percentage declined primarily due to lower average selling prices
in both business-to-business channels due to increased volumes and in
the direct-to-consumer channel due to a pricing trial and subsequent
reduction of direct-to-consumer pricing nationwide. This was partially
offset by increased mix towards direct-to-consumer sales and lower
average cost of goods sold per unit. Rental gross margin was 27.6% in
the second quarter of 2018 versus 25.0% in the second quarter of 2017.
The increase in rental gross margin was primarily due to lower
depreciation expense.

Total operating expense increased to $34.4 million, or 35.4% of revenue,
in the second quarter of 2018 versus $23.1 million, or 36.0% of revenue,
in the second quarter of 2017.

Operating expense included research and development expense of $1.8
million in the second quarter of 2018, which was up from $1.3 million in
the comparative period in 2017, primarily due to increased
personnel-related expenses. Sales and marketing expense increased to
$23.0 million in the second quarter of 2018 versus $11.9 million in the
comparative period in 2017, primarily due to personnel-related expenses
as we continued to hire inside sales representatives at our Cleveland
facility and increased advertising expenditures. General and
administrative expense decreased to $9.7 million in the second quarter
of 2018 versus $9.9 million in the comparative period in 2017, primarily
due to decreased bad debt expense and patent litigation costs, partially
offset by increased personnel-related expenses.

The Company reported an income tax benefit of $1.0 million in the second
quarter of 2018, compared to an income tax expense of $0.8 million
reported in the second quarter of 2017. The Company’s income tax benefit
in the second quarter of 2018 included a $3.9 million decrease in
provision for income taxes related to excess tax benefits recognized
from stock-based compensation compared to $2.5 million in the second
quarter of 2017. Excluding the stock-based compensation benefit, the
Company’s non-GAAP effective tax rate in the second quarter of 2018 was
21.2% versus 36.2% in the second quarter of 2017, primarily due to the
impacts of the U.S. federal tax reform.

In the second quarter of 2018, the Company reported net income of $14.6
million, compared to net income of $8.3 million in the second quarter of
2017. Earnings per diluted common share was $0.65 in the second quarter
of 2018 versus $0.38 in the second quarter of 2017, an increase of 71.1%.

Adjusted EBITDA for the three months ended June 30, 2018 rose 32.2% to
$19.0 million, or 19.5% of revenue, from $14.4 million, or 22.4% of
revenue, in the second quarter of 2017.

Cash, cash equivalents, and marketable securities were $208.4 million as
of June 30, 2018 compared to $188.3 million as of March 31, 2018, an
increase of $20.1 million in the second quarter of 2018.

Financial Outlook for 2018

Inogen is increasing its full year 2018 total revenue guidance range to
$340 to $350 million, up from $310 to $320 million, representing growth
of 36.3% to 40.3% versus 2017 full year results. The Company continues
to expect direct-to-consumer sales to be its fastest growing channel,
domestic business-to-business sales to have a significant growth rate,
and international business-to-business sales to have a solid growth
rate, where the 2018 strategy will continue to be heavily focused on the
European markets. Inogen still expects rental revenue to be down
approximately 10% in 2018 compared to 2017 as the Company continues to
focus on sales.

Further, the Company is also increasing its full year 2018 GAAP net
income and non-GAAP net income guidance range to $45 to $48 million, up
from $38 to $41 million, representing growth of 114.3% to 128.5%
compared to 2017 GAAP net income of $21.0 million and growth of 57.5% to
67.9% compared to 2017 non-GAAP net income of $28.6 million. The Company
estimates that the decrease in provision for income taxes related to
excess tax benefits recognized from stock-based compensation will lead
to a reduction in provision for income taxes of approximately $12
million in 2018, up from $8 million, based on forecasted stock activity,
which would lower its effective tax rate as compared to the U.S.
statutory rate. The Company expects its effective tax rate including
stock-based compensation deductions to vary quarter-to-quarter depending
on the amount of pre-tax net income, share price, and on the timing and
size of stock option exercises. Excluding the estimated $12 million
decrease in provision for income taxes expected in 2018, the Company
still expects a non-GAAP effective tax rate of approximately 25%.

Inogen is also increasing its guidance range for full year 2018 Adjusted
EBITDA to $65 to $69 million, up from $62 to $67 million, representing
27.9% to 35.7% growth compared to 2017 results.

Inogen also still expects net positive cash flow for 2018 with no
additional capital required to meet its current operating plan.

Conference Call

Individuals interested in listening to the conference call today at
1:30pm PT/4:30pm ET may do so by dialing (855) 238-8123 for domestic
callers or (412) 317-5217 for international callers. Please reference
Inogen (INGN) to join the call. To listen to a live webcast, please
visit the Investor Relations section of Inogen's website at: http://investor.inogen.com/.

A replay of the call will be available beginning August 7, 2018 at
3:30pm PT/6:30pm ET through 3:30pm PT/6:30pm ET on August 14, 2018. To
access the replay, dial (877) 344-7529 or (412) 317-0088 and reference
Access Code: 10121605. The webcast will also be available on Inogen's
website for one year following the completion of the call.

Inogen has used, and intends to continue to use, its Investor Relations
website, http://investor.inogen.com/,
as a means of disclosing material non-public information and for
complying with its disclosure obligations under Regulation FD. For more
information, visit http://investor.inogen.com/.

About Inogen

Inogen is innovation in oxygen therapy. We are a medical technology
company that develops, manufactures and markets innovative oxygen
concentrators used to deliver supplemental long-term oxygen therapy to
patients suffering from chronic respiratory conditions.

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including, among others, statements regarding anticipated growth
opportunities; hiring and marketing expectations; expectations for all
revenue channels for full year 2018; the expected impact of the decrease
in provision for income taxes related to excess tax benefits recognized
from stock-based compensation for full year 2018; and financial guidance
for 2018, including revenue, GAAP net income, Adjusted EBITDA, non-GAAP
net income, net cash flow, effective tax rates, and the need for
additional capital. Forward-looking statements are subject to numerous
risks and uncertainties that could cause actual results to differ
materially from currently anticipated results, including but not limited
to, risks arising from the possibility that Inogen will not realize
anticipated revenue; the possible loss of key employees, customers, or
suppliers; and intellectual property risks if Inogen is unable to secure
and maintain patent or other intellectual property protection for the
intellectual property used in its products. In addition, Inogen's
business is subject to numerous additional risks and uncertainties,
including, among others, risks relating to market acceptance of its
products; competition; its sales, marketing and distribution
capabilities; its planned sales, marketing, and research and development
activities; interruptions or delays in the supply of components or
materials for, or manufacturing of, its products; risks related to the
recent data security incident, remediation measures, and potential
claims; seasonal variations; unanticipated increases in costs or
expenses; and risks associated with international operations.
Information on these and additional risks, uncertainties, and other
information affecting Inogen’s business operating results are contained
in its Annual Report on Form 10-K for the year ended December 31, 2017
and in its other filings with the Securities and Exchange Commission.
Additional information will also be set forth in Inogen’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2018 to be filed with
the Securities and Exchange Commission. These forward-looking statements
speak only as of the date hereof. Inogen disclaims any obligation to
update these forward-looking statements except as may be required by law.

Use of Non-GAAP Financial Measures

Inogen has presented certain financial information in accordance with
U.S. GAAP and also on a non-GAAP basis for the three and six months
ended June 30, 2018 and June 30, 2017. Management believes that non-GAAP
financial measures, taken in conjunction with U.S. GAAP financial
measures, provide useful information for both management and investors
by excluding certain non-cash and other expenses that are not indicative
of Inogen's core operating results. Management uses non-GAAP measures to
compare Inogen's performance relative to forecasts and strategic plans,
to benchmark Inogen's performance externally against competitors, and
for certain compensation decisions. Non-GAAP information is not prepared
under a comprehensive set of accounting rules and should only be used to
supplement an understanding of Inogen's operating results as reported
under U.S. GAAP. Inogen encourages investors to carefully consider its
results under U.S. GAAP, as well as its supplemental non-GAAP
information and the reconciliation between these presentations, to more
fully understand its business. Reconciliations between U.S. GAAP and
non-GAAP results are presented in the accompanying table of this
release. For future periods, Inogen is unable to provide a
reconciliation of non-GAAP measures without unreasonable effort as a
result of the uncertainty regarding, and the potential variability of,
the amounts of interest income, interest expense, depreciation and
amortization, stock-based compensation, provision (benefit) for income
taxes, and certain other infrequently occurring items, such as
acquisition related costs, that may be incurred in the future.

Consolidated Balance Sheets

(amounts in thousands)

June 30,

December 31,

2018

2017

(unaudited)

Assets

Current assets

Cash and cash equivalents

$

166,344

$

142,953

Marketable securities

42,068

30,991

Accounts receivable, net

37,472

31,444

Inventories, net

27,407

18,842

Deferred cost of revenue

381

361

Income tax receivable

2,655

1,313

Prepaid expenses and other current assets

6,667

2,584

Total current assets

282,994

228,488

Property and equipment, net

21,972

20,103

Goodwill

2,304

2,363

Intangible assets, net

4,093

4,717

Deferred tax asset - noncurrent

20,736

18,636

Other assets

537

765

Total assets

$

332,636

$

275,072

Liabilities and stockholders' equity

Current liabilities

Accounts payable and accrued expenses

$

31,174

$

20,626

Accrued payroll

9,108

6,877

Warranty reserve - current

3,223

2,505

Deferred revenue - current

3,383

3,533

Income tax payable

344

345

Total current liabilities

47,232

33,886

Warranty reserve - noncurrent

5,507

3,666

Deferred revenue - noncurrent

11,713

9,402

Deferred tax liability - noncurrent

340

348

Other noncurrent liabilities

938

729

Total liabilities

65,730

48,031

Stockholders' equity

Common stock

21

21

Additional paid-in capital

231,879

218,109

Retained earnings

34,007

8,639

Accumulated other comprehensive income

999

272

Total stockholders' equity

266,906

227,041

Total liabilities and stockholders' equity

$

332,636

$

275,072

Consolidated Statements of Comprehensive Income

(unaudited)

(amounts in thousands, except share and per share amounts)

Three months ended

Six months ended

June 30,

June 30,

2018

2017

2018

2017

Revenue

Sales revenue

$

91,987

$

58,038

$

165,571

$

104,004

Rental revenue

5,251

6,083

10,718

12,617

Total revenue

97,238

64,121

176,289

116,621

Cost of revenue

Cost of sales revenue

44,968

27,993

81,916

49,906

Cost of rental revenue, including depreciation of $1,966 and $2,522

for the three months ended and $4,131 and $5,211 for the six

months ended, respectively

3,800

4,561

8,176

9,404

Total cost of revenue

48,768

32,554

90,092

59,310

Gross profit

48,470

31,567

86,197

57,311

Operating expense

Research and development

1,775

1,260

3,191

2,569

Sales and marketing

22,999

11,945

41,037

22,474

General and administrative

9,675

9,865

19,248

18,200

Total operating expense

34,449

23,070

63,476

43,243

Income from operations

14,021

8,497

22,721

14,068

Other income (expense)

Interest income

673

146

1,216

247

Other income (expense)

(1,048

)

523

(604

)

730

Total other income (expense), net

(375

)

669

612

977

Income before provision (benefit) for income taxes

13,646

9,166

23,333

15,045

Provision (benefit) for income taxes

(964

)

828

(2,035

)

775

Net income

$

14,610

$

8,338

$

25,368

$

14,270

Other comprehensive income (loss), net of tax

Change in foreign currency translation adjustment

76

197

184

197

Change in net unrealized gains (losses) on foreign currency hedging

723

(300

)

474

(246

)

Less: reclassification adjustment for net (gains) losses included in
net income

(1) Reconciliations of net income attributable to common
stockholders basic and diluted can be found in Inogen’s Quarterly Report
on Form 10-Q to be filed with the Securities and Exchange Commission.

Supplemental Financial Information

(unaudited)

(in thousands, except units and patients)

Three months ended

Six months ended

June 30,

June 30,

2018

2017

2018

2017

Revenue by region and category

Business-to-business domestic sales

$

32,943

$

21,154

$

60,959

$

38,615

Business-to-business international sales

20,759

14,919

37,665

26,342

Direct-to-consumer domestic sales

38,285

21,965

66,947

39,047

Direct-to-consumer domestic rentals

5,251

6,083

10,718

12,617

Total revenue

$

97,238

$

64,121

$

176,289

$

116,621

Additional financial measures

Units sold

54,700

32,400

100,100

58,000

Net rental patients as of period-end

28,500

32,300

28,500

32,300

Reconciliation of U.S. GAAP to Other Non-GAAP Financial Measures

(unaudited)

(in thousands)

Three months ended

Six months ended

June 30,

June 30,

Non-GAAP EBITDA and Adjusted EBITDA

2018

2017

2018

2017

Net income

$

14,610

$

8,338

$

25,368

$

14,270

Non-GAAP adjustments:

Interest income

(673

)

(146

)

(1,216

)

(247

)

Provision (benefit) for income taxes

(964

)

828

(2,035

)

775

Depreciation and amortization

2,816

3,117

5,809

6,321

EBITDA (non-GAAP)

15,789

12,137

27,926

21,119

Stock-based compensation

3,186

2,216

6,567

4,107

Adjusted EBITDA (non-GAAP)

$

18,975

$

14,353

$

34,493

$

25,226

Three months ended

Six months ended

June 30,

June 30,

Non-GAAP net income

2018

2017

2018

2017

Net income

$

14,610

$

8,338

$

25,368

$

14,270

Non-GAAP adjustments:

2017 U.S. tax reform(1)

—

—

—

—

Non-GAAP net income

$

14,610

$

8,338

$

25,368

$

14,270

Three months ended

Six months ended

June 30,

June 30,

Non-GAAP provision (benefit) for income taxes and effective tax
rate

2018

2017

2018

2017

Income before provision (benefit) for income taxes

$

13,646

$

9,166

$

23,333

$

15,045

Provision (benefit) for income taxes

(964

)

828

(2,035

)

775

Effective tax rate

-7.1

%

9.0

%

-8.7

%

5.2

%

Provision (benefit) for income taxes

$

(964

)

$

828

$

(2,035

)

$

775

Non-GAAP adjustments:

Excess tax benefits from stock-based compensation

3,853

2,489

7,105

4,702

2017 U.S. tax reform (1)

—

—

—

—

Provision for income taxes (non-GAAP)

$

2,889

$

3,317

$

5,070

$

5,477

Income before provision for income taxes

$

13,646

$

9,166

$

23,333

$

15,045

Provision for income taxes (non-GAAP)

2,889

3,317

5,070

5,477

Effective tax rate (non-GAAP)

21.2

%

36.2

%

21.7

%

36.4

%

(1) On December 22, 2017, the Tax Cuts and Jobs Act (TCJA)
was enacted into law, which significantly changes existing U.S. tax law
and includes numerous provisions that affect the Company. During the
fourth quarter of 2017, the Company recorded an estimated one-time net
charge due to the impact of changes in the tax rate, primarily on
deferred tax assets. There were no related charges during the second
quarter or the first six months of 2018.

Company

Follow Us

TERMS AND CONDITIONS OF USE

The investor relations site ("Site") with which this document is associated is maintained by S&P Global Market Intelligence ("S&P") on behalf of the organization featured on the Site (S&P's "Client"). These Terms and Conditions of Use ("Terms of Use") set forth the terms on which you may use the Site, and the information and materials contained therein (the "Contents"). By using the Site, you agree to these Terms of Use. If you do not agree to these Terms of Use, you are not authorized to use the Site or Contents in any manner, and you should immediately discontinue any use of the Site or the Contents.

S&P and/or its Client shall have the right at any time to modify or discontinue any aspect of the Site or any part of the Contents. S&P may also modify these Terms of Use without notice. You agree to monitor these Terms of Use, and to cease all access or use of the Site if you no longer agree to abide by the Terms of Use. Your continued use of the Site shall constitute acceptance of such modification.

S&P and the Client grant to you a limited, personal license to access the Site and to access and download the Contents, but only for your own personal, family and household use. You may not use, reproduce, distribute or display any portion of the Site for any other purpose, including without limit any commercial purpose. You may use the Site and the Contents for lawful purposes only. S&P and Client reserve all rights not expressly granted, including the right to terminate your use of the Site without notice.

The Site contains copyrighted material, trademarks and service marks, and other proprietary information, including but not limited to text, software, and graphics, which materials are owned by S&P and/or its Client. S&P and Client reserve all rights in the Contents. You agree not to reproduce, distribute, sell, broadcast, publish, retransmit, disseminate, circulate or commercially exploit the Site or the Contents without the express written consent of S&P and the Client.

You agree to access the Contents and the Site manually, by request, and not automatically, through the use of a program, or other means. You agree not to take any action, alone or with others, that would interfere with the operation of the Site, to alter the Site in any way, or to impede others' access to and freedom to enjoy and use the Site as made available by S&P and S&P’s Client.

THE SITE AND THE CONTENTS ARE PROVIDED ON AN "AS IS" BASIS. S&P, ITS CLIENT, AND ANY OTHER PROVIDERS OF THE INFORMATION EXPRESSLY DISCLAIM ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF ACCURACY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT.

NEITHER, S&P, THE CLIENT NOR EITHER OF THEIR AFFILIATES, SHAREHOLDERS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, EXEMPLARY , PUNITIVE SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THE SITE, THE USE OF OR INABILITY TO USE THE SITE, OR THE CONTENTS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN PARTICULAR, S&P WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY YOUR RELIANCE ON INFORMATION OBTAINED THROUGH THE SITE.

It is your responsibility to evaluate the accuracy, completeness or usefulness of any of the Contents available on the Site. Please seek the advice of professionals regarding the evaluation of any of the information on the Site.

The Site does not represent an offer or solicitation with respect to the purchase or sale of any security.

These Terms of Use are the entire agreement between the parties with respect to its subject matter, and it can be amended only via written agreement by S&P. These terms and conditions shall be governed by the law of New York, without regard to principals of conflicts or choice of laws.

Specifications apply to all new retail units sold after December 7th 2015.

Specifications for rental units through insurance may vary.

1By submitting this information, I authorize Inogen to contact me, including by phone.